Other EU countries view a robust carbon price as vital to meeting climate goals.
Spanish Prime Minister Pedro Sanchez last year called for a CO2 price cap to help tackle soaring inflation. Poland, which produces most of its electricity from coal, has blamed high CO2 prices on speculators and sought EU intervention to limit price spikes. Still, rising carbon prices are a cause of political tensions in the EU and breaching the 100 euro threshold is likely to reignite debates over prices. The return to coal has raised fears for Europe's climate targets, although EU policymakers say it is a short-term response - and the high price of fossil fuels, both coal and gas, will ultimately accelerate a shift to renewable energy. The price hike also follows an increase in power sector demand for CO2 permits in 2022, when dwindling Russian gas supplies helped to fuel a 7% increase in EU power generation from coal, the most CO2-intensive fossil fuel, despite the high CO2 price. Traders also said expectations of cooler weather and low wind speeds increased demand for permits from fossil fuel power generators in recent days and buying by speculators also drove prices.
The more emitters have to pay for EU carbon permits to cover each tonne of C02 they produce, the greater the incentive to invest in low carbon technologies and switch to less polluting fuels.ĮU countries and lawmakers agreed reforms to the EU carbon market late last year, creating a bullish mood that has been heightened in recent weeks as companies approach an April deadline to buy and submit enough CO2 permits to cover last year's emissions. The benchmark EU Allowance (EUA) contract rose to a high of 101.25 euros per tonne and was trading at 100.49 euros per tonne by 1549 GMT.ĮUAs are the main currency in the European Union's Emissions Trading System (ETS) that forces manufacturers, power companies and airlines to pay for each tonne of carbon dioxide they emit as part of the bloc's efforts to meet its climate targets. LONDON, Feb 21 (Reuters) - The price of permits on the European Union's carbon market hit 100 euros ($106.57) per tonne for the first time on Tuesday, a milestone that reflects the increased costs that factories and power plants must pay when they pollute.
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